Xbox's Phil Spencer says he wouldn't use Sony's own exclusivity tactics against PlayStation

In a recent federal court hearing, Xbox gaming CEO Phil Spencer says that he has no interest in using Sony's own exclusivity practices against PlayStation.

The recent FTC v Microsoft evidentiary hearing has unearthed lots of interesting details about Xbox, PlayStation, and the games industry in general. Based on key info and testimony presented in the case, we've surmised that Sony and Microsoft are very likely to sign a publishing agreement for Call of Duty on a post-merger basis.

Other revelations include Microsoft's view on Sony's exclusivity practices. According to the Xbox CEO, there's two sides to Microsoft's relationship with Sony. There's the cordial, lucrative, and mutually-beneficial side where big Xbox games like Minecraft see the two companies joining together in a strong symbiotic publishing agreement. Then there's the side that gets publicized the most, the one where Sony snaps up third-party exclusivity deals to further detrimentally impact Xbox. This behavior has made Microsoft see Sony as a "hostile and aggressive" competitor.

Interestingly enough, Microsoft's Phil Spencer doesn't plan to use this tactic against Sony, especially on a post-merger basis. If the $68.7 billion Microsoft-Activision merger goes through, Xbox intends to mostly utilize the publisher to expand its presence in the fast-growing mobile market. Activision's asset value exceeds $70 billion, the price that Microsoft is willing to pay, and the FTC is wary that Microsoft will use Activision's asset value as a means of offsetting the negative financial impact of withholding content from rival platforms--an effect that shows signals of anti-competitive practices and as such is justification to block the merger with Activision.

In fact, Microsoft doesn't expect its Xbox console segment to grow as a result of the deal.

During the hearing, Xbox gaming CEO Phil Spencer gave the following testimony about Microsoft using similar exclusivity tactics as Sony does in order to affect the PlayStation business.

Q If you had the financial ability to have a developer skip PlayStation any time you wanted, would you do it?

I would not

Q If you had the ability to to deprecate a game on PlayStation, would you do it?

Not in practice, no, it's not something I would do.

Note that this is almost assuredly in reference to third-party games. Microsoft has indeed made first-party games exclusive to Xbox, even those that had been multi-platform before an acquisition was made and then were made first-party exclusives following a buyout. That being said, existing games that had released on PlayStation had stayed on PlayStation, including Minecraft, The Elder Scrolls Online, and Fallout 76 among a smattering of other ZeniMax titles.

Examples of multi-platform games becoming first-party exclusives on a post-acquisition basis includes MachineGames' new Indiana Jones project, and apparently Starfield. There were rumors that Sony was about to purchase some sort of timed exclusivity for Starfield, perhaps 6-month or 12-month, and keep Bethesda's biggest new RPG off of Xbox.

The specter of Sony purchasing Starfield exclusivity for PlayStation was one of the main impetuses, or reasons, why Microsoft purchased ZeniMax for $7.5 billion. These games were both made exclusive to Xbox consoles and PC once they become first-party titles.

Elsewhere in the testimony, Spencer also confirms that Microsoft has to pay a lot more to secure any kind of third-party exclusivity deals, timed or otherwise.

Q You can't afford to make those kinds of upfront payments to make those exclusive deals, right?

Yes, it is more expensive for us to pay somebody to not ship on PlayStation than for Sony to not ship on Xbox.

This is because Xbox is in third place. Sony uses its market-leading position to negotiate lucrative and mutually-beneficial deals with third-party publishers, the same kind of deals that it negotiated with ZeniMax for titles like Ghostwire Tokyo and Deathloop.

These are realities of the video games industry and it behooves both platform-holders and developers to make and accept these deals; platform-holders secure content to hopefully maintain, or grow, their ecosystem, and developers receive critical boosts like upfront payments, marketing budgets, and perhaps the most important benefit of significantly reducing the time it takes to ship a product onto the market.

In Day 1 of the evidentiary hearing proceedings, ZeniMax head of publishing Pete Hines outlined some of the major benefits of signing exclusivity deals.

"You go to fewer platforms, your development gets more streamlined. It just needs to run as well as possible on one box, on PC--you know, a narrow focus always helps," Hines said.

Hines also commented on why Indiana Jones was previously a multi-platform game.

"The primary one in my view is what I said about reducing risk and trying to get to a degree of certainty. You're dealing with a licensor who's going to have a ton of feedback on what you're making, add a lot of time to your schedule, you're required to provide a release window. You immediately have a clock that's ticking.

"Before acquisition, we were a small independent publisher. We are not somebody who can afford misses or failures. Being independent and fighting publishers that are multiple times larger than you, we can't afford to miss. We have to stack the deck in our favor."